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CAPITAL RAISING PROCESS - UPDATE
NEWS RELEASE
Previous announcements and regulatory returns have referred to the capital
requirements for the development of the infrastructure and marketing activities
of Sage Group Limited`s ("Sage Group") international operations ("the
Business"), incorporating Sage Life USA and Sage Life Bermuda.
The capital raising process is proceeding according to plan and Merrill Lynch`s
New York-based investment banking group has been appointed as exclusive
financial advisors to Sage Group in connection with the development of a
strategic transaction to provide the Business with adequate development funding.
In this process, Sage Group will consider acquisition proposals but intends
giving preference to strategic alliances incorporating the capital commitments
required to support the Business` continued growth and development.
It is anticipated that a confidential offering memorandum concerning the
Business will be distributed to a limited number of qualified investors by the
end of the month. In the meanwhile, discussions with parties that have already
indicated interest will proceed. A definitive agreement is targeted to be
completed before the end of the year.
Swiss Re Life and Health America Inc. (Swiss Re) and Sage Insurance Group Inc.
("Sage"), a wholly owned subsidiary which controls its North America operations,
consider that for the development of appropriate long term capital arrangements,
the North American operations should enjoy continued stability in corporate and
management governance as well as appropriate levels of stable interim funding.
Because investment risk with respect to Sage`s products is generally retained by
contract-holders (and market-related guarantees are ceded to third-party
reinsurers), Sage Life USA now has excess capital on a risk adjusted basis, with
an NAIC risk based capital ratio of 2,627% at year end 2001, compared to the
life industry norm of 250% - 350%. Partly attributable to this fact, it has been
agreed with Swiss Re that Sage Life USA may reduce the statutory capital and
surplus requirement originally stipulated under the preference stock purchase
agreement between Sage and Swiss Re from $25 million to $20 million. Sage Group
and Sage have provided additional assurances to Swiss Re which will protect the
security and integrity of its existing capital investment, particularly should
Sage Group dispose of any portion of its USA investment, and also immediate
redress should the $20 million level of capital be breached. Swiss Re has also
agreed to defer if necessary the payment of its preferred stock dividend due in
December 2002 until the earlier of June 2003 or the completion of the capital
exercise.
As a result of these amendments, Sage is no longer in technical default in its
minimum capital covenant with Swiss Re and also has appropriate liquidity to
fund the operations during the anticipated capital process. Swiss Re has
indicated that it would consider further co-insurance arrangements dependent on
the progress of the capital exercise.
Consistent with the terms of the long standing historical association between
the groups, Swiss Re has reiterated its commitment to supporting Sage in the
development of its North American operation and the two groups will continue to
work closely with each other in the capital exercise and in overall interaction
with distribution partners, rating agencies and employees.
DISTRIBUTED ON BEHALF OF SAGE BY CATHY FINDLEY PUBLIC RELATIONS ON (011) 463-
6372 OR cathy@findleypr.co.za. FOR DIRECT COMMENT CALL BERNARD NACKAN ON 083
6410006
Date: 26/09/2002 09:38:00 AM Produced by the JSE SENS Department
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